How Can I Survive Being Laid Off Without Going Broke?

Chloe, 28, is an associate at a small marketing firm in New York — or, well, she was, until she got laid off when the company lost several accounts recently. She worked there for three years and made decent money — enough to pay for a studio apartment that she loves, the occasional nice dinner, and exercise classes — but not enough to put aside any significant savings (which she now regrets, for obvious reasons). She got two months’ pay in severance, and her health insurance is covered for the same amount of time. She’s panicking. What if she runs out of money before she finds a new job? Should she liquidate her 401(k)? Is it worth it to rack up credit-card debt, if it comes to that?

When I was 23, I was an assistant editor at a daily newspaper in New York. I loved that job. It paid next to nothing and I wasn’t particularly good at it, but it was exactly where I wanted to be. Then the recession happened, and the publication shuttered with just a few weeks’ notice. Not only was I out of a paycheck, but so was everybody else — my co-workers, and practically every third person in Manhattan. I had no money saved, and it sucked. But in some ways, it was a great way to start my career, because The Worst-Case Scenario happened quickly. I learned right off the bat that unemployment could be one all-staff meeting away, anytime. I got a part-time job, and then a full-time job, and then a better one. I’d like to think it taught me to be nimble.

In your case, Chloe, the worst-case scenario is happening now. It might not be fun in the moment, but in hindsight, it will be liberating.

What’s not liberating: a shame spiral. “I suggest being gentle with yourself in those early days,” says Liz Weston, a certified financial planner and columnist at NerdWallet. “I’ve been laid off twice, and both times there were signs that it was coming, but it was still an enormous shock.” If your friends offer to take you out for a consolatory dinner, by all means, pick a restaurant. It’s normal to be upset; give yourself a minute.

Next, clean house. Look at all your expenses — literally, make a list — and figure out what’s cuttable. “What are the fixed costs that you must pay (rent, utilities, etc.), and what are the variable costs that you can immediately eliminate (Netflix, shopping, restaurants)?” asks Kristin O’Keeffe Merrick, a financial advisor at Raymond James Wealth Management. “Getting rid of the nonessentials will help from a monetary point of view, as well as make you feel like you have some control over the situation.” Give yourself the dignity of executing those financial trims before you’re up against a wall — it feels much better to make them by choice.

Meanwhile, milk your former job for all it’s worth. Go to the dentist and the doctor and get all your checkups while you still have health benefits. Make nice with the HR department and your ex-colleagues. “No flaming your employer or co-workers on social media, or anywhere else that leaves a record,” says Weston. “You don’t want to do anything that could make your situation worse.” Also, read the fine print on your severance package: When will you receive payment, and exactly how much will it be? Depending on its timing, you may qualify for unemployment benefits. Contact your local claims center to find out (ideally as soon as possible, because the process may take several weeks).

As you’re budgeting, look at what you have and estimate how long it will last you. “Can you get through the next few months?” asks Merrick. “If not, will you have to resort to asking for help from someone (parent, sibling)?” This isn’t ideal, obviously, and don’t do this unless you have to — but a personal loan is preferable to credit cards (more on those in a moment).

If you have any debt, this is a time to put it on the back burner. “For student loans, investigate your options for forbearance or deferral,” says Weston. “You don’t have to pull the trigger yet, but you should know how to get these breaks if you need them.” Call your administrator and explain what’s going on; they’re trained to help.

Once you’ve minimized your expenses, get scrappy. “Don’t wait for a job consulting in your field or the ‘perfect’ opportunity,” says John Foley, vice-president at SoFi, a company that offers personal-finance services online. “Offer your services on TaskRabbit, Fiverr, or other skill-sharing platforms. This will reduce your weekly cash burn and give you more time to find the right job.” Also, be shameless. “Everyone you talk to is a networking opportunity,” adds Foley. “Get out there and talk to people. Every no gets you closer to a yes.” Consider this as you’re thinning out your budget, too. “Don’t drop your gym membership — spend more time there and stay healthy. Go when people with jobs are there and network. Do cut your cable channels; don’t be a couch potato.”

Speaking of don’ts: It might be tempting to throw responsibility to the wind—everything’s beyond your control, anyway!—but that will only make matters worse. “Do not blow your severance on a trip to Costa Rica to de-stress,” says Merrick. “Sometimes receiving severance can feel like a windfall. It is not. It is just an advance. Treat it as such!” That money is meant to help you find a job. Think of it as a salary you pay yourself for plotting your next move. It’s not meant to be binge-spent on a new coffee table where you’ll sit and eat Haagen-Dazs at 2 p.m. (because you can).

Also, do not pillage your 401(K). There’s really no scenario where this is a good idea, even if it means you have to put some of your living expenses on your credit cards (also not ideal, but the lesser of two evils—only do it if you have to, try to use a card with a low APR, and then pay that debt off as soon as you can). “Credit card rates pale against the cost of a retirement fund withdrawal,” explains Weston. “You lose one quarter to one half of the withdrawal to taxes and penalties, plus you lose all the future tax-deferred gains that money could have made. Expect every $100 withdrawal to cost you $2,000 or more in lost retirement income.” Just leave it alone.

And finally: Don’t freak out. You have assets. “Even if you don’t have a fat savings account, you have skills. You have relationships. People (at least some of them!) wish you well,” says Weston. “Those are huge advantages that should tell you that you don’t need to panic.”